The official inflation in Brazil, measured by the IPCA (National Index of Prices to the Broad Consumer), accumulated an increase of 5.79% in the 12 months of 2022, reported this Tuesday (10) the IBGE (Brazilian Institute of Geography and Statistics) .
Influenced by fuel tax cuts, the index lost strength compared to 2021, when it had risen 10.06%.
Even with the truce, prices remain at a high level for the pockets of Brazilians. A sign of this is that the IPCA exceeded the inflation target pursued by the BC (Central Bank) for the second consecutive year.
The variation also came in above market expectations. Analysts consulted by the Bloomberg agency projected a variation of 5.60% in 2022.
The center of the inflation target was 3.5% last year, with a tolerance interval of 1.5 percentage points upwards (5%) or downwards (2%).
With the result above this range, BC president Roberto Campos Neto will have to write a letter explaining the non-compliance with the reference measure.
This Tuesday, the IBGE also reported that the IPCA rose 0.62% in December, after rising 0.41% in November.
The new result came in above market expectations. Analysts consulted by Bloomberg expected a 0.44% change in the last month of last year.
Economists estimate that the high cost will not end in 2022 and also represents a challenge for the new government of Luiz Inácio Lula da Silva (PT) in 2023.
In a scenario of fiscal uncertainties with possible expenditures by the PT administration, financial market institutions increased the estimates for this year’s IPCA.
The expected increase for the accumulated of 2023 rose from 5.31% to 5.36%, according to the most recent edition of the Focus bulletin, released by BC on Monday (9).
If the projection is confirmed, 2023 will mark the third consecutive break in the inflation target.
The center of the reference measure was set at 3.25% for this year. The tolerance range, again, is 1.5 percentage points more (4.75%) or less (1.75%).
Economist Luca Mercadante, from Rio Bravo Investimentos, assesses that the country is going through a period of “very pressured inflation” and says that the rise in interest rates promoted by the Central Bank has not yet been able to fully control the rise in prices.
Rio Bravo raised the forecast for an increase in the IPCA from 5.2% to 5.4% in 2023. “The fiscal concern is gaining strength. It causes inflation expectations to deteriorate”, says Mercadante, in reference to the fear of the expansion of public spending in the Lula government.
According to the economist, the resumption of demand for services, after the pandemic restrictions, is another factor that challenges the IPCA truce this year.
Marcos de Oliveira Julio, 38, had to adapt his routine to deal with the high prices. The resident of São Paulo reduced meat consumption and substituted products in search of cheaper prices in the supermarket.
“Inflation is putting an end to plans”, says Julio, who works as a video editor.
“Me and my girlfriend decided to move in together [em fevereiro de 2022]. As we put everything at the tip of the pencil, we would pay the rent and save part of the money to buy our own property. But that money has been eroded,” he adds.
Throughout 2022, the IPCA accumulated in 12 months reached 12.13% until April. The loss of momentum in subsequent releases was driven by tax cuts on products and services such as fuel and electricity.
In this context, the index calculated by the IBGE registered three consecutive months of deflation (fall), from July to September.
The cut in taxes on fuel came amid Jair Bolsonaro’s (PL) re-election plans, which ended up frustrated by his defeat by Lula at the polls.
Meanwhile, food prices remained under pressure in the country. With heavy rains and drought records, the unfavorable weather reduced the supply of goods and impacted the prices on supermarket shelves.
In addition to the climate issue, the War in Ukraine also had effects in 2022. The conflict raised prices of agricultural commodities and inputs used in food production.
The food shortage mainly affects the poor population. This occurs because, in proportional terms, vulnerable families allocate a larger portion of their income to purchase basic products.
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